UAE’s F&B sector is reshaping post-pandemic – and cloud kitchens will remain central to this

Close to 90 per cent of Middle Eastern consumers aren’t only looking for healthier eating options but also willing to pay more for them. Conscious eating will only grow as consumers are driven by a desire to reduce eating habits associated with unethical practices and to consume more organic, healthy, and environmentally friendly products. As it stands, the sustainability and naturality of products influence the purchasing behavior of more than 60 per cent of UAE consumers.

Sustainability and healthier food choices are fostering innovation and driving investment in the region. Recent moves in the UAE have resulted in the launch of an F&B innovation lab rooted in sustainability, health, and convenience. Dubai-based Sarya Holdings, with the concept of vertical farming, and Smart Acres is bringing health-conscious food to stores.

Companies must be willing to both introduce new products or upgrade existing ones while focusing on communicating the features and benefits of conscious eating clearly to consumers, in order to fully leverage this trend.

Alternative food service models

An increased desire for speed, continuation of quality, and affordability has necessitated technological advancements in the foodservice sector. Cloud kitchens have proven they are here to stay and aren’t just a novelty. The model competes aggressively in the current climate due to its several advantages - low investment, increased efficiency, and multiple brands under one roof are just some of these.

The global cloud kitchen industry is expected to exceed $71.4 billion by 2027, with over 70 per cent of dine-in players in the UAE are already willing to invest. Cross-market operations look to be on the horizon for contenders within the industry.

KLC Virtual Restaurants, Kuwait’s first cloud-kitchen trader, plans to see a 50 per cent operational increase, including 10 new kitchens in Saudi Arabia, Bahrain and Qatar. Correspondingly, UAE-grown brands Kaykroo and Sweetheart Kitchen together aim to open 45 more stores in Saudi Arabia by the end of this year.

Traditional restaurants and kitchens need to explore cloud kitchens or other lean foodservice models in the form of both in-house and outsourced models. Commissions/rent must be weighed against growing revenue opportunities in both options. It’s the direct way players can keep on top of the fierce competition within the sector and further expand revenue opportunities within a clearly growing market.

Personalization

With digitization continuing to take the reins, consumer personalization (e.g. product recommendations, promotions, and direct communication) is expected to be in heightened demand. The UAE consumer market is overwhelmingly inclined to buy from e-commerce platforms that personalize content (approximately 90 per cent), and most of them actively seek out online stores with such dedicated content offerings.

Carrefour is just one of the leading companies leveraging cross-platform collected data to better target their existing and potential customer base. Employing their centralized database, real-time data, and numerous IoT device data to match customers with promoted products through their preferred channel.

To champion customer centricity, F&B businesses will need to remain agile by investing in their personalization capabilities and communication, thus improving lead generation and customer engagement.

Risks and opportunities are abundant in this challenging and highly competitive F&B market. Those who quickly adapt to changing consumer needs and accordingly reset their commercial strategy will succeed.